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Thursday, 21 July 16
CONSTRUCTIVE TOTAL LOSS: WHAT GOES IN TO CALCULATING QUANTUM? - HILL DICKINSON
 KNOWLEDGE TO ELEVATE
The Commercial Court recently delivered its judgment in an important case (Connect Shipping Inc and Machrimar Management SA -v- Sveriges Anfgartygs Assurans Forening (The Swedish Club) and others) [2016] EWHC 1580 (Comm), interpreting the law around the obligations of insurers and the rights of owners in relation to the total loss of a vessel.
The case is authority for the proposition that a NOA tendered five-and-a-half months after the casualty is not necessarily late, considering the fact-sensitive nature of the legal right exercised by the shipowner of abandoning his vessel to his insurers. It confirmed that reasonable expenditure incurred before the issue of a Notice of Abandonment can be included in the calculation of quantum for a CTL, as well as the owners’ share of SCOPIC. Further, the Court followed the finding in another important recent decision – the “BRILLANTE VIRTUOSO” – that inevitable uncertainty about the cost of potential repairs should permit that calculation to include a significant contingency (10% in this case).
In the event, the Owners of the vessel the “RENOS”, represented by Hill Dickinson International, were successful in claiming of the Insurers their relevant proportions of the US$12 million under the hull policy (plus sue and labour costs), and triggering a further US$3 million Increased Value policy claim.
The High Court ruled that the vessel was a constructive total loss following a fire that broke out in the engine room whilst the Vessel was sailing in a laden condition of the Egyptian coast, in the Red Sea. It was common ground that the fire was an insured peril under the policies and that it caused extensive damage to the Vessel, resulting in her loss of main engine power and requiring tug assistance. The dispute concerned the measure of the indemnity to which the Owners were entitled.
The Insurers denied the Vessel was a constructive total loss as a matter of quantum, contending that the Owners were entitled to an indemnity on a partial loss basis. Owners therefore brought proceedings in the High Court against the Insurers under the hull and machinery policies. In his judgment handed down on 1 July 2016, Mr Justice Knowles ruled upon five main issues:
1. Was the notice of abandonment given too late?
The fire broke out on 23 August 2012. The NOA was given on 1 February 2013.
Mr Justice Knowles initially considered the meaning of the wording of section 62(3) of the Marine Insurance Act 1906 (MIA) which provides that the NOA ‘must be given with reasonable diligence after the receipt of reliable information of the loss, but where the information is of a doubtful character the assured is entitled to a reasonable time to make inquiry… ’.
The Court noted Roche J’s statement in George Cohen v Standard Marine Insurance (1925) 21 Lloyd’s Rep 30, that: “the assured cannot postpone his election, if all the facts are known, merely because opinions may fluctuate at all events as to the results or proper conclusion to be drawn from the facts.”
This was a case however in which in Mr Justice Knowles’ judgment, “the nature of the casualty was such that achieving reliable information of the loss would be a complex task and take time”. The Court placed particular emphasis on the fact that owners throughout the period from the casualty to the giving of NOA were in receipt of conflicting quotations from surveyors involved both on their behalf and that of the underwriters, but also from experienced shipyards on the estimated costs of repairs, including, importantly, yards consulted by the underwriters.
2. Should pre-NOA expenses count towards a CTL?
The issue of whether pre-NOA expenses should count towards a CTL has attracted a lot of attention from the legal and insurance market as existing case law has not explicitly dealt with it in detail.
The Court found no basis on the wording of clause 19 of the Institute Time Clauses for limiting the cost of recovery and repair to recovery and repair after NOA, differentiating a constructive total loss from the right to claim for a constructive total loss, which are two distinct concepts. It held, therefore, pursuant to a textual interpretation of Clause 9.2 and 19.2 of the Institute Time Clauses (1/10/83) and section 60 of the MIA, that pre-NOA expenses should be included in a CTL calculation, reiterating that a NOA is not an essential ingredient of a constructive total loss.
The Insurers denied liability based on two grounds. In arguing that pre-NOA expenses should not count towards a CTL, they proposed that what they termed a ‘protective NOA’ should be tendered prior to incurring the costs of recovery and repair in cases where it was possible that the vessel might become a CTL. The Court dismissed this out of hand observing that, under the clear provision of section 62(2) of the MIA, once a NOA is accepted ‘the abandonment is irrevocable.’
Secondly, the Insurers also argued that the phrase ‘future salvage operations’ in section 60(2)(ii) of the MIA suggests that costs already incurred should not be taken under consideration. Mr Justice Knowles disagreed, partly departing from two previous decisions, (Helmville Ltd -v- Yorkshire Insurance Company Lt [1965] 1 Lloyd’s Rep 361 (the “MEDINA PRINCESS”) and Hall -v- Hayman (1912) 17 Comm Cas 81), stating that the phrasing is not restrictive but instead the legislature’s intention was simply to (also) take into account the expenses of future salvage operations rather than exclude expenses already incurred prior to tendering the NOA.
3. Specifically amongst pre-NOA expenses, should SCOPIC remuneration (after Article 13 payments have been taken into account) count towards a CTL calculation?
The Court further considered whether SCOPIC liability is to be taken into account as a cost of recovery for the purposes of a CTL. Mr Justice Knowles considered the effect of Clause 15 of the SCOPIC and in accordance with ordinary principles of construction he held that that it is an indivisible part of the salvage operations arising from the casualty and as such must be included in the calculation of a CTL.
4. Were the costs for a standby tug reasonably incurred?
The Owners had employed the services of a standby tug for the period the Vessel remained in the Gulf of Suez, in the event, for about four months.
The Insurers argued that the size and rate of the tug was excessive as the casualty only required standby services which a smaller tug could perform.
The Court gave due consideration to the specific nature of the tug market, salvors’ requirement to deliver the vessel to a tug of sufficient capabilities on completion of the LOF, the condition of the Vessel and the purposes for which a tug was required and held, on the evidence, that it was reasonable and necessary to engage a tug of that size, although not for the entire period of four months, as owners should have explored other possibilities in the meantime, but for around half that time.
5. What margin of general contingency should be allowed?
Both parties accepted the need to allow a contingency but disagreed on the percentage to be applied. Mr Justice Knowles considered Flaux LJ’s observations in the recent case “BRILLANTE VIRTUOSO”, a case in which the Owners were also represented by Hill Dickinson, and applied a 10% contingency agreeing with Owners’ approach. The Court emphasized the necessity of allowance for uncertainty as a result of the nature of the casualty, the location of the Vessel and the range of estimates and quotations, which undermined the arithmetical test applied by the Insurers.
It is worth noting that, in the “BRILLANTE VIRTUOSO”, Flaux LJ held that, in calculating quantum for assessing if a vessel can be declared a CTL, there might well be uncertainty about the nature and extent of damage and that the Court would, therefore, allow a ‘large margin’ in assessing the cost of repair.
Thus, Mr Justice Knowles held that the NOA was effective and that the vessel, on the evidence, was a CTL. It is likely that the Insurers will seek leave to appeal on various grounds from the Court of Appeal after Mr Justice Knowles refused leave to appeal.
Source: Hill Dickinson
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Friday, 01 July 16
BREXIT SET TO HURT SHIPPING IN THE LONG-TERM AS IT WILL TAKE ITS TOLL IN THE GLOBAL ECONOMY'S GROWTH - HELLENIC SHIPPING
Setting aside the short-term negative impact of the Brexit, in terms of stock market and currency volatility, it’s more than evident that the ...
Friday, 01 July 16
U.S'S COAL EXPORTS HAVE DECLINED FOR TWELVE QUARTERS IN A ROW - EIA
COALspot.com – U.S, world’s one of the largest coal producers has produced approximately totalled an estimated 13.7 million short t ...
Thursday, 30 June 16
CAPE - THIS WEEK'S FREIGHT AND ACTIVITY LEVEL HAVE KEPT STABLE - FEARNLEYS
Cape
This week’s freight and activity level have kept stable. It is support at the present levels and despite a volatile market the freight ...
Thursday, 30 June 16
OIL PRODUCT TANKERS EARNINGS DECLINE AS STOCKBUILDING SLOWS DOWN - BIMCO
BIMCO’s expectations remain as the oil product tanker fleet continues to grow with earnings at the lowest since Q3 in 2014. But there is stil ...
Wednesday, 29 June 16
THE DRY BULK INDICES, OPPOSITE TO MOST GLOBAL MARKET INDICES, ROSE END OF LAST WEEK
Last week closed off with a massive shockwave for markets across the world following the British referendum, the result of which will mark the begi ...
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Showing 2376 to 2380 news of total 6871 |
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- MS Steel International - UAE
- Xindia Steels Limited - India
- Indian Oil Corporation Limited
- Bukit Makmur.PT - Indonesia
- Romanian Commodities Exchange
- Cigading International Bulk Terminal - Indonesia
- Aditya Birla Group - India
- Indonesian Coal Mining Association
- Kohat Cement Company Ltd. - Pakistan
- Medco Energi Mining Internasional
- Chamber of Mines of South Africa
- Global Green Power PLC Corporation, Philippines
- CIMB Investment Bank - Malaysia
- Mjunction Services Limited - India
- Sinarmas Energy and Mining - Indonesia
- Madhucon Powers Ltd - India
- Latin American Coal - Colombia
- Straits Asia Resources Limited - Singapore
- Petrochimia International Co. Ltd.- Taiwan
- Thiess Contractors Indonesia
- Jaiprakash Power Ventures ltd
- Antam Resourcindo - Indonesia
- Australian Commodity Traders Exchange
- Carbofer General Trading SA - India
- Siam City Cement - Thailand
- TeaM Sual Corporation - Philippines
- Intertek Mineral Services - Indonesia
- Kobexindo Tractors - Indoneisa
- Bahari Cakrawala Sebuku - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Kumho Petrochemical, South Korea
- Tamil Nadu electricity Board
- Coal and Oil Company - UAE
- Altura Mining Limited, Indonesia
- Ministry of Finance - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Samtan Co., Ltd - South Korea
- Independent Power Producers Association of India
- Ceylon Electricity Board - Sri Lanka
- Rio Tinto Coal - Australia
- Sarangani Energy Corporation, Philippines
- Goldman Sachs - Singapore
- Energy Development Corp, Philippines
- Interocean Group of Companies - India
- Australian Coal Association
- Grasim Industreis Ltd - India
- Oldendorff Carriers - Singapore
- Indo Tambangraya Megah - Indonesia
- Bharathi Cement Corporation - India
- Holcim Trading Pte Ltd - Singapore
- Gujarat Sidhee Cement - India
- Commonwealth Bank - Australia
- Minerals Council of Australia
- Global Coal Blending Company Limited - Australia
- OPG Power Generation Pvt Ltd - India
- GVK Power & Infra Limited - India
- Malabar Cements Ltd - India
- Bhoruka Overseas - Indonesia
- Larsen & Toubro Limited - India
- London Commodity Brokers - England
- Singapore Mercantile Exchange
- Miang Besar Coal Terminal - Indonesia
- Ambuja Cements Ltd - India
- Banpu Public Company Limited - Thailand
- Trasteel International SA, Italy
- Alfred C Toepfer International GmbH - Germany
- Salva Resources Pvt Ltd - India
- Planning Commission, India
- Anglo American - United Kingdom
- Krishnapatnam Port Company Ltd. - India
- Borneo Indobara - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Star Paper Mills Limited - India
- ASAPP Information Group - India
- Uttam Galva Steels Limited - India
- Pendopo Energi Batubara - Indonesia
- White Energy Company Limited
- Central Java Power - Indonesia
- Vedanta Resources Plc - India
- Baramulti Group, Indonesia
- Power Finance Corporation Ltd., India
- Formosa Plastics Group - Taiwan
- VISA Power Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Simpson Spence & Young - Indonesia
- Orica Mining Services - Indonesia
- Sree Jayajothi Cements Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Chettinad Cement Corporation Ltd - India
- Mercator Lines Limited - India
- Marubeni Corporation - India
- Semirara Mining and Power Corporation, Philippines
- Energy Link Ltd, New Zealand
- San Jose City I Power Corp, Philippines
- Metalloyd Limited - United Kingdom
- Indian Energy Exchange, India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Attock Cement Pakistan Limited
- Mintek Dendrill Indonesia
- Bhushan Steel Limited - India
- Binh Thuan Hamico - Vietnam
- Port Waratah Coal Services - Australia
- Kapuas Tunggal Persada - Indonesia
- Electricity Authority, New Zealand
- Indogreen Group - Indonesia
- Maheswari Brothers Coal Limited - India
- CNBM International Corporation - China
- Kaltim Prima Coal - Indonesia
- Orica Australia Pty. Ltd.
- Jorong Barutama Greston.PT - Indonesia
- Dalmia Cement Bharat India
- Gujarat Electricity Regulatory Commission - India
- Bangladesh Power Developement Board
- LBH Netherlands Bv - Netherlands
- Lanco Infratech Ltd - India
- International Coal Ventures Pvt Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- McConnell Dowell - Australia
- PNOC Exploration Corporation - Philippines
- Bhatia International Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Posco Energy - South Korea
- Maharashtra Electricity Regulatory Commission - India
- Siam City Cement PLC, Thailand
- Ind-Barath Power Infra Limited - India
- Ministry of Mines - Canada
- SMG Consultants - Indonesia
- Tata Chemicals Ltd - India
- Cement Manufacturers Association - India
- Central Electricity Authority - India
- Aboitiz Power Corporation - Philippines
- Price Waterhouse Coopers - Russia
- GMR Energy Limited - India
- Jindal Steel & Power Ltd - India
- Iligan Light & Power Inc, Philippines
- Globalindo Alam Lestari - Indonesia
- Meralco Power Generation, Philippines
- AsiaOL BioFuels Corp., Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Karbindo Abesyapradhi - Indoneisa
- Vijayanagar Sugar Pvt Ltd - India
- ICICI Bank Limited - India
- Kepco SPC Power Corporation, Philippines
- Videocon Industries ltd - India
- IHS Mccloskey Coal Group - USA
- Kalimantan Lumbung Energi - Indonesia
- Electricity Generating Authority of Thailand
- Asmin Koalindo Tuhup - Indonesia
- Indika Energy - Indonesia
- Vizag Seaport Private Limited - India
- Coastal Gujarat Power Limited - India
- The Treasury - Australian Government
- South Luzon Thermal Energy Corporation
- Timah Investasi Mineral - Indoneisa
- Merrill Lynch Commodities Europe
- Manunggal Multi Energi - Indonesia
- IEA Clean Coal Centre - UK
- Sical Logistics Limited - India
- Savvy Resources Ltd - HongKong
- Riau Bara Harum - Indonesia
- Essar Steel Hazira Ltd - India
- Meenaskhi Energy Private Limited - India
- PowerSource Philippines DevCo
- PTC India Limited - India
- Makarim & Taira - Indonesia
- Wood Mackenzie - Singapore
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Eastern Energy - Thailand
- Petron Corporation, Philippines
- Sakthi Sugars Limited - India
- Therma Luzon, Inc, Philippines
- Kideco Jaya Agung - Indonesia
- Sindya Power Generating Company Private Ltd
- Edison Trading Spa - Italy
- Bulk Trading Sa - Switzerland
- Mercuria Energy - Indonesia
- Heidelberg Cement - Germany
- GAC Shipping (India) Pvt Ltd
- Toyota Tsusho Corporation, Japan
- Africa Commodities Group - South Africa
- Karaikal Port Pvt Ltd - India
- Kartika Selabumi Mining - Indonesia
- Parliament of New Zealand
- Directorate Of Revenue Intelligence - India
- Standard Chartered Bank - UAE
- Georgia Ports Authority, United States
- Economic Council, Georgia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- The University of Queensland
- Renaissance Capital - South Africa
- European Bulk Services B.V. - Netherlands
- Parry Sugars Refinery, India
- Bank of Tokyo Mitsubishi UFJ Ltd
- India Bulls Power Limited - India
- The State Trading Corporation of India Ltd
- Coalindo Energy - Indonesia
- Thai Mozambique Logistica
- Semirara Mining Corp, Philippines
- PetroVietnam Power Coal Import and Supply Company
- Ministry of Transport, Egypt
- New Zealand Coal & Carbon
- Bayan Resources Tbk. - Indonesia
- Sojitz Corporation - Japan
- Bukit Baiduri Energy - Indonesia
- Global Business Power Corporation, Philippines
- Barasentosa Lestari - Indonesia
- Agrawal Coal Company - India
- SMC Global Power, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Rashtriya Ispat Nigam Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Eastern Coal Council - USA
- Deloitte Consulting - India
- SN Aboitiz Power Inc, Philippines
- Wilmar Investment Holdings
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